Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
[Here's the text of our post. You can also read it on the American Thinker website at this URL.]
by Howard Richman, Raymond Richman and Jesse Richman
The 3.2% economic growth rate for the first quarter, reported as the “advanced estimate” by the Bureau of Economic Analysis on Friday, caught everyone by surprise. During both the George W. Bush and Obama administrations, the average quarterly economic growth rate was only 1.9% per year. But during the 9 quarters that Trump has been president, the economic growth rate has averaged 2.8% per year, almost a full percentage point higher.
Anybody who wants to know how the American economy would look today if someone espousing policies like Obama’s were still president only need peek over our northern border. Canadian Prime Minister Justin Trudeau stayed in Obama’s Trans Pacific Partnership trade agreement and in Obama’s Paris Climate Accord, despite Trump pulling the US out of both agreements. And, how has Canada been doing? Just 1.6% GDP growth over the latest year and 0.1% growth during the latest quarter!
Middle Class Income
Whenever GDP grows, American income grows at about the same rate. But income growth is not evenly distributed. At the end of the Bush presidency, median household income (after subtracting for inflation) was at about the same level as before Bush took office.
When running for office in 2008, Obama correctly claimed that the rich were getting richer, but those in the middle class were not benefiting. So how did the middle class do under Obama? Again, median household income failed to grow!
In January 2017, after the presidencies of both Bush and Obama, median household income (after subtracting for inflation) was actually 1.3% lower than it had been in January 2000. (Our statistics for median household income come from Sentier Research, which has been calculating and graphing household income as it unfolds.)
How is Trump doing with middle class income? Pretty well! Median household income has risen at a 2.5% annual clip since Trump became president, approximately the same rate that GDP has been growing. In fact, median household income is now higher than ever before! How is Trump doing it?
Trade and Climate Policies
Trump’s success is largely due to him reversing the lousy trade and climate policies of his predecessors. Economists have estimated that the impact of Bill Clinton’s decision to let China into the World Trade Organization alone cost millions of U.S. manufacturing jobs.
When other countries adopted tariffs, non-tariff barriers and manipulated exchange rates, Bush and Obama let them. As a result, many good paying middle class manufacturing jobs moved abroad, hurting middle-income wage earners.
In contrast, President Trump has applied tariffs, threatened tariffs and renegotiated trade agreements to balance trade and bring factories to the US. As a result, factories have been springing up and expanding in the US, employing middle-income wage earners with good-paying jobs.
Take South Korea, for example. Bush and Obama negotiated a “free trade agreement” with South Korea which went into effect in 2012. As a result, the U.S. trade deficit in goods and services with South Korea tripled from $5.4 billion in 2011 to $16.6 billion in 2016. In 2018, Trump renegotiated that agreement. As a result, the U.S. trade deficit in goods and services with South Korea went down to $5.3 billion in 2018.
To his credit, Bush kept the United States out of international climate agreements. Not so with Obama. He was the chief negotiator behind the “Paris Climate Accord” which required that developed countries severely reduce their carbon emissions, but let “undeveloped” countries (including China) continue to increase their carbon emissions. The easily extrapolated consequence would be the movement of even more American factories abroad.
Presidents Bush and Obama proved to the American people that unilateral free trade and unbalanced climate agreements don’t help the middle class. Together, they presided over slow GDP growth and a slight decline in median household income (after subtracting for inflation). In contrast, President Trump’s policies are producing rapid GDP growth and making the American middle class more prosperous than ever before!
The Richmans co-authored the 2014 book Balanced Trade published by Lexington Books, and the 2008 book Trading Away Our Future published by Ideal Taxes Association.
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